Fixed Costs

question 40

Multiple Choice

Fixed costs

• A) do not exist in the long run.
• B) depend on a firm's level of output.
• C) are zero if a firm produces no output.
• D) are total costs minus average variable costs.

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Definitions:

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts is a contra-asset account that reflects the estimated amount of accounts receivable which may not be collectible.

Credit Sales

Transactions in which goods or services are sold and payment is deferred, allowing customers to purchase products or services on account.

Uncollectible Accounts

Accounts receivable that are recognized as uncollectible losses due to the inability to collect from the debtor.

Allowance Method

An accounting technique used to estimate and account for bad debts (uncollectible receivables) based on historical data or economic conditions.